The document discusses domestic transfer pricing provisions in India. Some key points:
- Domestic transfer pricing regulations were introduced in 2012 to cover specified domestic transactions between related parties exceeding Rs. 5 crore.
- Specified domestic transactions include transactions covered under sections 40A, 80IA, and 10AA relating to inter-unit transfers, related party payments, and transactions between closely connected parties.
- The regulations moved from determining fair market value to determining arm's length price using specified transfer pricing methods for domestic related party transactions.
- Sections like 40A(2) and 80IA were amended to exclude disallowance/adjustments if the domestic related party transaction was at arm's length.
- There has been a
Specified Domestic Transactions under Transfer PricingMitesh Katira
- The document discusses specified domestic transactions (SDT) under Indian tax law, which were introduced to align domestic transfer pricing with international standards.
- SDT provisions allow tax authorities to make adjustments if payments between related parties or tax holiday-eligible transactions are not at arm's length prices.
- Taxpayers must maintain documentation and obtain audit certificates to demonstrate compliance with SDT rules. Non-compliance can result in penalties.
- The definition and computation of arm's length price is analyzed, along with applicable documentation requirements and assessment procedures for SDTs. Key cases and issues are also discussed.
VAT Implementation in Kingdom of Saudi Arabia ( KSA)Mitesh Katira
VAT is on the way of implementation in the KSA from 1st of Jan 2018. It is critical for the companies to understand the nuances of the same and work on a roadmap to implement VAT so as to optimize the impact not only on profitability, working capital, pricing but also ERP, team sensitization and vendor education.
Here is a simple graphical guide for understanding the KSA VAT.
VAT is on the way of implementation in the UAE from 1st of Jan 2018. It is critical for the companies to understand the nuances of the same and work on a roadmap to implement VAT so as to optimize the impact not only on profitability, working capital, pricing but also ERP, team sensitization and vendor education.
Here is a simple graphical guide for understanding the UAE VAT.
Saudi Arabia - VAT Frequently Asked QuestionsAlex Baulf
The document provides frequently asked questions about Saudi Arabia's VAT system. It discusses VAT eligibility and registration processes, including registration thresholds, group registrations, and mandatory vs voluntary registration. It also covers VAT procedures such as return filing frequencies, invoice requirements, record keeping obligations, and interactions with other governmental entities.
VAT Implementation in KSA (Kingdom of Saudi Arabia)Mitesh Katira
The document provides an overview of value-added tax (VAT) implementation in Saudi Arabia, including:
1) It outlines the legal framework for VAT including the GCC agreement, VAT law, and implementation regulations.
2) It explains the VAT model through an example showing how VAT is applied at each stage of production and distribution.
3) It provides a high-level roadmap and timeline for VAT implementation in Saudi Arabia, including registration requirements, tax rates, compliance periods, and transition support.
Budget 2016 was recently announced by the Finance Minister of India. This Presentation unravels the Transfer Pricing and International Tax proposals of the Budget 2016.
This document summarizes key information about preparing for the Goods and Services Tax (GST) in India. It outlines advantages like availability of input tax credits and consolidated compliance. It recommends businesses undertake impact assessments, migrate registrations, and revisit costing. It also notes hurdles like the inability to register centrally and procedural complexity. Support needed includes guidance on migration, returns, and vendor management before and after GST implementation on July 1, 2017.
Specified Domestic Transactions under Transfer PricingMitesh Katira
- The document discusses specified domestic transactions (SDT) under Indian tax law, which were introduced to align domestic transfer pricing with international standards.
- SDT provisions allow tax authorities to make adjustments if payments between related parties or tax holiday-eligible transactions are not at arm's length prices.
- Taxpayers must maintain documentation and obtain audit certificates to demonstrate compliance with SDT rules. Non-compliance can result in penalties.
- The definition and computation of arm's length price is analyzed, along with applicable documentation requirements and assessment procedures for SDTs. Key cases and issues are also discussed.
VAT Implementation in Kingdom of Saudi Arabia ( KSA)Mitesh Katira
VAT is on the way of implementation in the KSA from 1st of Jan 2018. It is critical for the companies to understand the nuances of the same and work on a roadmap to implement VAT so as to optimize the impact not only on profitability, working capital, pricing but also ERP, team sensitization and vendor education.
Here is a simple graphical guide for understanding the KSA VAT.
VAT is on the way of implementation in the UAE from 1st of Jan 2018. It is critical for the companies to understand the nuances of the same and work on a roadmap to implement VAT so as to optimize the impact not only on profitability, working capital, pricing but also ERP, team sensitization and vendor education.
Here is a simple graphical guide for understanding the UAE VAT.
Saudi Arabia - VAT Frequently Asked QuestionsAlex Baulf
The document provides frequently asked questions about Saudi Arabia's VAT system. It discusses VAT eligibility and registration processes, including registration thresholds, group registrations, and mandatory vs voluntary registration. It also covers VAT procedures such as return filing frequencies, invoice requirements, record keeping obligations, and interactions with other governmental entities.
VAT Implementation in KSA (Kingdom of Saudi Arabia)Mitesh Katira
The document provides an overview of value-added tax (VAT) implementation in Saudi Arabia, including:
1) It outlines the legal framework for VAT including the GCC agreement, VAT law, and implementation regulations.
2) It explains the VAT model through an example showing how VAT is applied at each stage of production and distribution.
3) It provides a high-level roadmap and timeline for VAT implementation in Saudi Arabia, including registration requirements, tax rates, compliance periods, and transition support.
Budget 2016 was recently announced by the Finance Minister of India. This Presentation unravels the Transfer Pricing and International Tax proposals of the Budget 2016.
This document summarizes key information about preparing for the Goods and Services Tax (GST) in India. It outlines advantages like availability of input tax credits and consolidated compliance. It recommends businesses undertake impact assessments, migrate registrations, and revisit costing. It also notes hurdles like the inability to register centrally and procedural complexity. Support needed includes guidance on migration, returns, and vendor management before and after GST implementation on July 1, 2017.
The document outlines Goods and Services Tax transition provisions, including allowing existing taxpayers to provisionally register for GST and carry forward input tax credits from prior taxes, as well as provisions for works contracts, stock transfers, and price revisions between the prior and GST tax regimes. It also addresses issues around determining the eligible carried forward amounts based on admissibility under both prior and GST laws.
Transfer pricing: practical manual for developing countries - Appendix II Doc...saiprasadbagrecha
This document provides examples of country rules on transfer pricing documentation from Korea and India.
For Korea, it outlines requirements for taxpayers to report their transfer pricing method to tax authorities, provide requested information on international transactions, face sanctions for non-compliance, and be exempt from under-reporting penalties if contemporaneous documentation is provided.
For India, it states that documentation must be maintained under section 92D of the Finance Act, including enterprise-wise documents describing the taxpayer, transaction-specific documents, and computation documents. It provides examples of the enterprise-wise documents required.
Maintenance of Accounts and Records, GST compliances and process of GST return filings. Type of Return under GST. Return under CGST, SGST, IGST. GSTR1, GSTR2, GSTR3,
This document provides an overview of analyzing financial statements. It covers legal forms of business, basic accounting principles, components of financial statements like the balance sheet, income statement, and cash flow statement. It discusses understanding key elements of these statements like assets, liabilities, equity, revenue and expenses. It also describes ways to decipher financial information through ratio analysis, cash flow analysis and notes to the accounts. Examples are provided on how to evaluate companies for investment and analyze changes in income statement accounts over time.
The Finance Bill of 2012 extends transfer pricing regulations to domestic transactions between related parties. This subjects taxpayers claiming tax incentives like SEZ benefits or deductions under sections 80IA/IB/IC to recomputation of income based on fair market value of related party transactions over Rs. 5 crore. While this aims to bring objectivity to related party transactions, it significantly increases compliance burden. The changes take effect from April 2013 and apply to AY 2013-14 onwards, impacting many industries with tax benefits or intra-group transactions.
This document summarizes the key accounts and records that must be kept under the Goods and Services Tax (GST) in India. It outlines the requirements for tax invoices, credit notes, debit notes, and other documents. It also specifies the accounts and records that must be maintained, including production, inventory, supplies, taxes, and other required documents. All accounts and records must be kept for 5 years or longer if under audit or legal proceedings.
This document provides an overview of understanding financial statements for the purposes of an audit. It discusses reviewing periods of up to 5 years, focusing on key accounting concepts like money measurement and going concern. Trial balances and balance sheets are examined in detail, including accounts, classifications, movements, and balances. Specific items like reverse charge mechanisms, reimbursements, and netting are highlighted. The tax audit report is also reviewed for depreciation, credit balances, and prior period adjustments. Other areas of focus include ratios, foreign transactions, and demands under other laws.
GST AUDIT and its Impact on Statutory Audit/Tax AuditGST Law India
The following presentation enumerates the Auditor’s Comments on the correctness of Valuations including transaction value, Section 15 provisions, Valuation Rules, Value of supply of services in case of pure agent, Reimbursement of expenses and Margin scheme and other special valuations.
The document outlines proposed amendments to various sections of the Income Tax Act related to phasing out of exemptions and deductions. Key points include:
- Profit linked, investment linked and area based deductions will be phased out for both corporate and non-corporate taxpayers by FY 2020-21.
- Accelerated depreciation rates will be restricted to 40% from FY 2017-18.
- Weighted deductions for scientific research will be restricted to 150% from FY 2017-18 to FY 2019-20, and 100% from FY 2020-21.
- No deductions shall be available for new units set up in Special Economic Zones or for eligible projects/schemes commencing after
Taxpert Professionals || Presentation on Goods and Services TaxTAXPERT PROFESSIONALS
This document provides an overview of the framework and key aspects of the Goods and Services Tax (GST) that was implemented in India in 2017. It discusses the present indirect tax structure, taxes that will be subsumed under GST, the proposed GST rate structure, and key concepts like taxable supply, time and place of supply, input tax credit, returns and compliance requirements. It also covers transitional provisions and highlights aspects businesses need to consider to prepare for GST, such as registration requirements, determining the place of supply, and increased compliance. Taxpert Professionals can help businesses with impact analysis, implementation support, and ongoing assistance to navigate GST requirements.
The document discusses the provisions related to registration under the GST law. It explains that registration is compulsory for taxable persons if their aggregate turnover exceeds the prescribed threshold and gives certain categories of persons who are required to register irrespective of the threshold. It provides details about the procedure for obtaining regular registration including filing of application forms, verification process, and issuance of registration certificate. It also summarizes key aspects related to amendment, cancellation, and revocation of registration.
This document provides an overview of the key aspects of the proposed Goods and Services Tax (GST) model in India, including transitional provisions from the current indirect tax system. It summarizes the present tax structure, the proposed GST structure consisting of CGST, SGST and IGST, features of the GST model including threshold limits and input tax credit utilization. It also outlines the transitional provisions for migration of existing taxpayers to GST and availability of tax credits, as well as the tax treatment of returns, job works and switching to the composition scheme.
In recent past, it has been noticed that the people making payment to NRIs who have investments in India are not aware of the compliance requirements relating to such payments. Through this slide-desk, the taxability of foreign payments made to NRI has been captured, especially the machinery provisions of section 195 and consequences of default.
Revised ICDS ppt - CIRC Noida Branch by CA Parul Mittalparul mittal
With effect from April 01, 2016, Income Computation and Disclosure Standards have become effective on Indian Taxpayer. Hence, it is important to understand the concept of standards, the recognition principles, disclosure requirements and transitional provisions. This presentation explains the basic structure of ICDS and contains the explanations issued by CBDT in March 2017.
Presentation seeks to address issues faced by stakeholders (importers, exporters, manufacturers, traders) in understanding the law, compliance requirements and challenges in transition
Renewed hopes on GST - Dr Sanjiv AgarwalD Murali ☆
Renewed hopes on GST - Dr Sanjiv Agarwal - Article published in Business Advisor, dated June 25, 2016 - http://www.magzter.com/IN/Shrinikethan/Business-Advisor/Business/
Tweeted on www.twitter.com/BusinessAdvDM
Topics to be covered:
Introduction of ICDS
Applicability of ICDS
Scope
Identification of tangible assets
Components of Actual cost
Special cases
Inclusions and Exclusions
Self-constructed tangible fixed asset
Non-monetary consideration
Improvements and Repairs
Joint ownership and Joint cost
Transitional provisions
Differences between ICDS V, AS-10 and Ind-AS-16
This document provides an overview of domestic transfer pricing provisions in India. It discusses key concepts like specified domestic transactions (SDT), related parties, applicable sections like 40A(2) and 80A, documentation requirements, and penalties. SDT includes transactions between related parties exceeding INR 50 million annually. The scope was expanded based on a Supreme Court case suggesting potential for tax arbitrage with losses or differential tax rates. Documentation like functional analysis and economic analysis is required to demonstrate arm's length pricing of SDTs. Non-compliance can lead to disallowance of expenses or income adjustments along with penalties.
Indian Domestic Transfer Pricing Provisions - an Overview by Ameya KunteAmeya Kunte
This presentation was during Transfer pricing workshop arranged by Chamber of Tax Consultants on March 23rd, Saturday. The presentation cover the overview of Domestic Transfer pricing provisions introduced by Finance Act 2012, history of introduction (including Supreme Court ruling in Glaxo) and some issues.
The document outlines Goods and Services Tax transition provisions, including allowing existing taxpayers to provisionally register for GST and carry forward input tax credits from prior taxes, as well as provisions for works contracts, stock transfers, and price revisions between the prior and GST tax regimes. It also addresses issues around determining the eligible carried forward amounts based on admissibility under both prior and GST laws.
Transfer pricing: practical manual for developing countries - Appendix II Doc...saiprasadbagrecha
This document provides examples of country rules on transfer pricing documentation from Korea and India.
For Korea, it outlines requirements for taxpayers to report their transfer pricing method to tax authorities, provide requested information on international transactions, face sanctions for non-compliance, and be exempt from under-reporting penalties if contemporaneous documentation is provided.
For India, it states that documentation must be maintained under section 92D of the Finance Act, including enterprise-wise documents describing the taxpayer, transaction-specific documents, and computation documents. It provides examples of the enterprise-wise documents required.
Maintenance of Accounts and Records, GST compliances and process of GST return filings. Type of Return under GST. Return under CGST, SGST, IGST. GSTR1, GSTR2, GSTR3,
This document provides an overview of analyzing financial statements. It covers legal forms of business, basic accounting principles, components of financial statements like the balance sheet, income statement, and cash flow statement. It discusses understanding key elements of these statements like assets, liabilities, equity, revenue and expenses. It also describes ways to decipher financial information through ratio analysis, cash flow analysis and notes to the accounts. Examples are provided on how to evaluate companies for investment and analyze changes in income statement accounts over time.
The Finance Bill of 2012 extends transfer pricing regulations to domestic transactions between related parties. This subjects taxpayers claiming tax incentives like SEZ benefits or deductions under sections 80IA/IB/IC to recomputation of income based on fair market value of related party transactions over Rs. 5 crore. While this aims to bring objectivity to related party transactions, it significantly increases compliance burden. The changes take effect from April 2013 and apply to AY 2013-14 onwards, impacting many industries with tax benefits or intra-group transactions.
This document summarizes the key accounts and records that must be kept under the Goods and Services Tax (GST) in India. It outlines the requirements for tax invoices, credit notes, debit notes, and other documents. It also specifies the accounts and records that must be maintained, including production, inventory, supplies, taxes, and other required documents. All accounts and records must be kept for 5 years or longer if under audit or legal proceedings.
This document provides an overview of understanding financial statements for the purposes of an audit. It discusses reviewing periods of up to 5 years, focusing on key accounting concepts like money measurement and going concern. Trial balances and balance sheets are examined in detail, including accounts, classifications, movements, and balances. Specific items like reverse charge mechanisms, reimbursements, and netting are highlighted. The tax audit report is also reviewed for depreciation, credit balances, and prior period adjustments. Other areas of focus include ratios, foreign transactions, and demands under other laws.
GST AUDIT and its Impact on Statutory Audit/Tax AuditGST Law India
The following presentation enumerates the Auditor’s Comments on the correctness of Valuations including transaction value, Section 15 provisions, Valuation Rules, Value of supply of services in case of pure agent, Reimbursement of expenses and Margin scheme and other special valuations.
The document outlines proposed amendments to various sections of the Income Tax Act related to phasing out of exemptions and deductions. Key points include:
- Profit linked, investment linked and area based deductions will be phased out for both corporate and non-corporate taxpayers by FY 2020-21.
- Accelerated depreciation rates will be restricted to 40% from FY 2017-18.
- Weighted deductions for scientific research will be restricted to 150% from FY 2017-18 to FY 2019-20, and 100% from FY 2020-21.
- No deductions shall be available for new units set up in Special Economic Zones or for eligible projects/schemes commencing after
Taxpert Professionals || Presentation on Goods and Services TaxTAXPERT PROFESSIONALS
This document provides an overview of the framework and key aspects of the Goods and Services Tax (GST) that was implemented in India in 2017. It discusses the present indirect tax structure, taxes that will be subsumed under GST, the proposed GST rate structure, and key concepts like taxable supply, time and place of supply, input tax credit, returns and compliance requirements. It also covers transitional provisions and highlights aspects businesses need to consider to prepare for GST, such as registration requirements, determining the place of supply, and increased compliance. Taxpert Professionals can help businesses with impact analysis, implementation support, and ongoing assistance to navigate GST requirements.
The document discusses the provisions related to registration under the GST law. It explains that registration is compulsory for taxable persons if their aggregate turnover exceeds the prescribed threshold and gives certain categories of persons who are required to register irrespective of the threshold. It provides details about the procedure for obtaining regular registration including filing of application forms, verification process, and issuance of registration certificate. It also summarizes key aspects related to amendment, cancellation, and revocation of registration.
This document provides an overview of the key aspects of the proposed Goods and Services Tax (GST) model in India, including transitional provisions from the current indirect tax system. It summarizes the present tax structure, the proposed GST structure consisting of CGST, SGST and IGST, features of the GST model including threshold limits and input tax credit utilization. It also outlines the transitional provisions for migration of existing taxpayers to GST and availability of tax credits, as well as the tax treatment of returns, job works and switching to the composition scheme.
In recent past, it has been noticed that the people making payment to NRIs who have investments in India are not aware of the compliance requirements relating to such payments. Through this slide-desk, the taxability of foreign payments made to NRI has been captured, especially the machinery provisions of section 195 and consequences of default.
Revised ICDS ppt - CIRC Noida Branch by CA Parul Mittalparul mittal
With effect from April 01, 2016, Income Computation and Disclosure Standards have become effective on Indian Taxpayer. Hence, it is important to understand the concept of standards, the recognition principles, disclosure requirements and transitional provisions. This presentation explains the basic structure of ICDS and contains the explanations issued by CBDT in March 2017.
Presentation seeks to address issues faced by stakeholders (importers, exporters, manufacturers, traders) in understanding the law, compliance requirements and challenges in transition
Renewed hopes on GST - Dr Sanjiv AgarwalD Murali ☆
Renewed hopes on GST - Dr Sanjiv Agarwal - Article published in Business Advisor, dated June 25, 2016 - http://www.magzter.com/IN/Shrinikethan/Business-Advisor/Business/
Tweeted on www.twitter.com/BusinessAdvDM
Topics to be covered:
Introduction of ICDS
Applicability of ICDS
Scope
Identification of tangible assets
Components of Actual cost
Special cases
Inclusions and Exclusions
Self-constructed tangible fixed asset
Non-monetary consideration
Improvements and Repairs
Joint ownership and Joint cost
Transitional provisions
Differences between ICDS V, AS-10 and Ind-AS-16
This document provides an overview of domestic transfer pricing provisions in India. It discusses key concepts like specified domestic transactions (SDT), related parties, applicable sections like 40A(2) and 80A, documentation requirements, and penalties. SDT includes transactions between related parties exceeding INR 50 million annually. The scope was expanded based on a Supreme Court case suggesting potential for tax arbitrage with losses or differential tax rates. Documentation like functional analysis and economic analysis is required to demonstrate arm's length pricing of SDTs. Non-compliance can lead to disallowance of expenses or income adjustments along with penalties.
Indian Domestic Transfer Pricing Provisions - an Overview by Ameya KunteAmeya Kunte
This presentation was during Transfer pricing workshop arranged by Chamber of Tax Consultants on March 23rd, Saturday. The presentation cover the overview of Domestic Transfer pricing provisions introduced by Finance Act 2012, history of introduction (including Supreme Court ruling in Glaxo) and some issues.
This document discusses amendments to tax audit rules and sections of the Income Tax Act of 1961 for the assessment year 2013-2014. It provides details on mandatory e-filing of tax audit reports and various forms. It also summarizes amendments made to sections like 9, 32, 35, 40A, 44AB, 80IA, 90, 193, 194E, 194J, and 115O. The document then discusses issues around determining whether share trading constitutes a business or capital gains. It analyzes several court cases and their rationale. Finally, it provides guidance from ICAI on the meaning of turnover and examples for inclusion/exclusion.
International and Domestic transfer Pricing Final Pradeep A
This document provides an overview of transfer pricing in India. It discusses key concepts like associated enterprises, international transactions, specified domestic transactions, and arm's length price. It outlines India's transfer pricing regulations and compliance requirements, including the computation of income based on arm's length pricing. It also covers penalties for non-compliance, the audit process, documentation requirements, and advance pricing agreements. Global developments around base erosion and profit shifting are also mentioned.
International & Domestic transfer pricing - Presentation - pptVaibhav Vakharia
The document discusses transfer pricing under Indian tax laws. It defines transfer price as the price assumed to have been charged between related entities for goods, services or other transactions. It notes major concerns around tax savings and profit shifting. It outlines the applicability of transfer pricing to international and specified domestic transactions between associated enterprises. It discusses key definitions and concepts around associated enterprises, arms-length price, and documentation requirements. Penalties for non-compliance with transfer pricing regulations are also summarized.
This document discusses domestic transfer pricing regulations in India. It provides an overview of transfer pricing and its objectives. It explains the introduction of domestic transfer pricing regulations to prevent shifting of profits between related parties in India through non-arm's length pricing of transactions. Specifically, it covers the scope of domestic transactions under sections 40A(2) and 10AA, which deal with expenditure incurred between related parties and transactions between tax holiday units. It also discusses some issues and challenges in complying with domestic transfer pricing regulations.
CA Varun Sethi - IFRS trainings - IFRIC 12 - Accounting for service concessi...Varun Sethi
Presentation by CA Varun Sethi
The Presentation discusses the accounting framework for accounting by Grantors and Operators. Covered in detail is the IFRIC 12 - Accounting by Operators/ Concessionaires for Service concession arrangements (SCA).
The presentation also helps the reader understand the technical differences between leases- IAS 17/IFRIC 4/ SCA etc and suggests the appropriate accounting in case of BOT, BOO, ROT, Lease, 100% Divestment cases.
Industries Impacted
1. Non Utility generators - Solar and Wind companies/ Gencos
2. Infrastructure Companies - Toll Road, Seaport, Airport operators.
3. EPC (Engineering, procurement and Construction) companies.
4. Turnkey projects installation cos
CA Varun Sethi - IFRS trainings - IFRIC 12 - Accounting for service concessi...Varun Sethi
Presentation by CA Varun Sethi
The Presentation discusses the accounting framework for accounting by Grantors and Operators. Covered in detail is the IFRIC 12 - Accounting by Operators/ Concessionaires for Service concession arrangements (SCA).
The presentation also helps the reader understand the technical differences between leases- IAS 17/IFRIC 4/ SCA etc and suggests the appropriate accounting in case of BOT, BOO, ROT, Lease, 100% Divestment cases.
Industries Impacted
1. Non Utility generators - Solar and Wind companies/ Gencos
2. Infrastructure Companies - Toll Road, Seaport, Airport operators.
3. EPC (Engineering, procurement and Construction) companies.
4. Turnkey projects installation cos
CA Varun Sethi - IFRS trainings - IFRIC 12 - Accounting for service concessi...Varun Sethi
Presentation by CA Varun Sethi
The Presentation discusses the accounting framework for accounting by Grantors and Operators. Covered in detail is the IFRIC 12 - Accounting by Operators/ Concessionaires for Service concession arrangements (SCA).
The presentation also helps the reader understand the technical differences between leases- IAS 17/IFRIC 4/ SCA etc and suggests the appropriate accounting in case of BOT, BOO, ROT, Lease, 100% Divestment cases.
Industries Impacted
1. Non Utility generators - Solar and Wind companies/ Gencos
2. Infrastructure Companies - Toll Road, Seaport, Airport operators.
3. EPC (Engineering, procurement and Construction) companies.
4. Turnkey projects installation cos
This document summarizes key aspects of domestic transfer pricing in India. It discusses the applicability of transfer pricing provisions to specified domestic transactions (SDTs) if the aggregate value exceeds Rs. 5 crores. It outlines the compliance requirements including determining the arm's length price using specified methods and maintaining documentation. The five acceptable transfer pricing methods - Comparable Uncontrolled Price (CUP) method, Resale Price Method (RPM), Cost Plus Method (CPM), Profit Split Method (PSM), and Transactional Net Margin Method (TNMM) - are also briefly described.
Budget synopsis by Blue Consulting (March 19th 2012)Chandan Goyal
The document provides a synopsis of direct and indirect tax proposals from the Indian budget presented on March 16, 2012. Key direct tax proposals include no change in corporate tax rates, removal of cascading dividend distribution tax, and increased thresholds for tax audits and presumptive taxation. International tax proposals focus on advance pricing agreements, transfer pricing regulations, and clarifications overriding previous court judgments. Personal tax proposals include an increased basic exemption limit and widening of the 20% tax slab.
The document discusses India's Goods and Services Tax (GST) system. It outlines the existing indirect tax structure and the key changes under GST, including the introduction of CGST, SGST, IGST and UTGST. It summarizes the taxes that will be subsumed under GST and explains input tax credit provisions. Key features include real-time invoice matching and the use of technology to facilitate compliance.
Here is the comprehensive details of direct tax proposal, budget 2016. The NCLT provides complete coverage of the Companies Act 2013, Companies Act 1956 and related rules, notifications, circulars, orders, forms etc.
https://www.nclt.in/
Basics of Income Computation & Disclosure Standards Naman Shrimal
The document provides an overview of upcoming Income Computation and Disclosure Standards (ICDS) and their implications. Some key points:
1. ICDS will come into effect from FY 2016-17 and replace the existing tax accounting standards. ICDS cover various topics like valuation of inventories, construction contracts, revenue recognition, etc.
2. ICDS are applicable to all assessees except individuals and HUFs not required to get tax audit. They are meant for computation of income under specific heads and not for MAT/book purposes.
3. There are differences between ICDS and existing Accounting Standards on certain concepts like prudence, changes in accounting policies, etc. which could lead
The document summarizes key highlights of India's Foreign Trade Policy 2015-2020. Some key points include:
1) Simplification and merger of various export reward schemes into a single Merchandise Exports from India Scheme (MEIS) and Service Exports from India Scheme (SEIS) with simplified procedures.
2) Incentives under MEIS and SEIS will be extended to Special Economic Zones to boost 'Make in India'.
3) Initiatives to facilitate trade and ease of doing business through online applications, paperless processing, and inter-ministerial consultations.
4) New initiatives to support exports of SCOMET items, defense goods, and e-commerce exports
The budget document summarizes key changes for salaried individuals, taxation of long term capital gains (LTCG), business income, international taxation, and miscellaneous items. For salaried taxpayers, deduction limits for medical expenses and interest income were increased. LTCG will now be taxed at 10% for gains over Rs. 1 lakh. Business income rules were expanded and tax rates increased for large companies. International tax provisions now include a broader definition of permanent establishment and taxing digital businesses based on economic presence in India. Various deductions and exemptions were also introduced or modified.
The document outlines the agenda for a webcast on opportunities in GST, including a brief background on GST and transitional challenges. It then provides details on the timing allocated to various topics, including impact analysis through examples and key impact areas. The impact areas discussed include the need to re-engineer processes, procurement, credit carry forward claims, exemptions, composition scheme, vendor management, agreements, and accounting practices.
This document discusses the annual revenue requirement and tariff order of GRIDCO Ltd for fiscal year 2015-16. It summarizes GRIDCO's power purchase costs, pass through expenses, interest expenses, and expected revenue from distribution companies. It also outlines GRIDCO's total revenue requirement, excess/deficit on revenue requirements, power purchase details for different distribution companies, and statements of profit and loss and balance sheet. Suggestions are provided such as proper trading policy, reducing outstanding dues, fulfilling revenue deficit, investing surplus funds, and improving employee skills.
Specified domestic transactions (SDTs) refer to certain domestic transactions between related parties that are now subject to transfer pricing regulations. SDTs must meet certain conditions, including exceeding Rs. 20 crore in value and being between related resident parties. Transactions covered include payments to specified persons, transactions involving goods/services, and business transactions between closely connected parties. All documentation and compliance requirements for international transactions also apply to SDTs. The inclusion of SDTs expands the scope of India's domestic transfer pricing regulations.
This document discusses the estimation of cash flows for capital budgeting purposes. It defines key terms like capital expenditures, revenue expenditures, and incremental cash flows. It explains the importance of accurately estimating cash flows and outlines the principles and components of cash flow estimation. Cash flows need to be estimated for the initial investment, annual operating cash flows over the project life, and any terminal cash flows. Inaccurate cash flow estimation can lead to wrong investment decisions and negatively impact a company's profitability and financial position.
Genocide in International Criminal Law.pptxMasoudZamani13
Excited to share insights from my recent presentation on genocide! 💡 In light of ongoing debates, it's crucial to delve into the nuances of this grave crime.
This document briefly explains the June compliance calendar 2024 with income tax returns, PF, ESI, and important due dates, forms to be filled out, periods, and who should file them?.
सुप्रीम कोर्ट ने यह भी माना था कि मजिस्ट्रेट का यह कर्तव्य है कि वह सुनिश्चित करे कि अधिकारी पीएमएलए के तहत निर्धारित प्रक्रिया के साथ-साथ संवैधानिक सुरक्षा उपायों का भी उचित रूप से पालन करें।
Guide on the use of Artificial Intelligence-based tools by lawyers and law fi...Massimo Talia
This guide aims to provide information on how lawyers will be able to use the opportunities provided by AI tools and how such tools could help the business processes of small firms. Its objective is to provide lawyers with some background to understand what they can and cannot realistically expect from these products. This guide aims to give a reference point for small law practices in the EU
against which they can evaluate those classes of AI applications that are probably the most relevant for them.
Sangyun Lee, 'Why Korea's Merger Control Occasionally Fails: A Public Choice ...Sangyun Lee
Presentation slides for a session held on June 4, 2024, at Kyoto University. This presentation is based on the presenter’s recent paper, coauthored with Hwang Lee, Professor, Korea University, with the same title, published in the Journal of Business Administration & Law, Volume 34, No. 2 (April 2024). The paper, written in Korean, is available at <https://shorturl.at/GCWcI>.
What are the common challenges faced by women lawyers working in the legal pr...lawyersonia
The legal profession, which has historically been male-dominated, has experienced a significant increase in the number of women entering the field over the past few decades. Despite this progress, women lawyers continue to encounter various challenges as they strive for top positions.
Lifting the Corporate Veil. Power Point Presentationseri bangash
"Lifting the Corporate Veil" is a legal concept that refers to the judicial act of disregarding the separate legal personality of a corporation or limited liability company (LLC). Normally, a corporation is considered a legal entity separate from its shareholders or members, meaning that the personal assets of shareholders or members are protected from the liabilities of the corporation. However, there are certain situations where courts may decide to "pierce" or "lift" the corporate veil, holding shareholders or members personally liable for the debts or actions of the corporation.
Here are some common scenarios in which courts might lift the corporate veil:
Fraud or Illegality: If shareholders or members use the corporate structure to perpetrate fraud, evade legal obligations, or engage in illegal activities, courts may disregard the corporate entity and hold those individuals personally liable.
Undercapitalization: If a corporation is formed with insufficient capital to conduct its intended business and meet its foreseeable liabilities, and this lack of capitalization results in harm to creditors or other parties, courts may lift the corporate veil to hold shareholders or members liable.
Failure to Observe Corporate Formalities: Corporations and LLCs are required to observe certain formalities, such as holding regular meetings, maintaining separate financial records, and avoiding commingling of personal and corporate assets. If these formalities are not observed and the corporate structure is used as a mere façade, courts may disregard the corporate entity.
Alter Ego: If there is such a unity of interest and ownership between the corporation and its shareholders or members that the separate personalities of the corporation and the individuals no longer exist, courts may treat the corporation as the alter ego of its owners and hold them personally liable.
Group Enterprises: In some cases, where multiple corporations are closely related or form part of a single economic unit, courts may pierce the corporate veil to achieve equity, particularly if one corporation's actions harm creditors or other stakeholders and the corporate structure is being used to shield culpable parties from liability.
Receivership and liquidation Accounts
Being a Paper Presented at Business Recovery and Insolvency Practitioners Association of Nigeria (BRIPAN) on Friday, August 18, 2023.
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1. Vasai Branch of ICAI
Specified Domestic
Transactions
12 September 2015
Ajit Kumar Jain
2. Transfer Pricing Adjustments – Trend
TP audit trends indicate greater scrutiny, leading to increased adjustments and resultant litigation
Assessment
Year
No. of TPAudits
Completed
Number of
Adjustment Cases
% of
Adjustment
Cases
Amount of
Adjustment
(Rs. in Crores)
2002-03 1,061 239 23 1,220
2003-04 1501 337 22 2,287
2004-05 1,768 471 27 3,432
2005-06 219 84 39 1,614
2006-07 1,726 670 39 6,140
2007-08 1,830 813 44 10,908
2008-09 2,301 1,138 49 23,237
2009-10 2,638 1,343 52 44,531
2010-11 3,171 1,686 53 70,016
2011-12 3,617 1,920 53 59,602
Source: Annual report Ministry of Finance
Vasai Branch of ICAI- Domestic Transfer Pricing 2
3. Trend of High Transfer Pricing Adjustments Continues
62%11%
17%
10%
Analysis of 1230 no. of ITAT
cases
Partly in
favour of
taxpayer and
revenue
Remanded
back for fresh
adjudication
In favour of
taxpayer
In favour of
revenue
01-02 02-03 03-04 04-05 05-06 06-07 07-08 08-09 09-10
Est. Adj.
in USD mn
300 560 860 1,100 2,160 4,440 9,000 12,000 10,000
% of cases adj 23 22 27 39 44 50.97 50.91 53.17 53.08
300
560
860 1100
2160
4440
9000
12000
10000
23
22
27
39
44
50.97 50.91
53.17
53.08
10
15
20
25
30
35
40
45
50
55
60
-
2,000
4,000
6,000
8,000
10,000
12,000
14,000
Vasai Branch of ICAI- Domestic Transfer Pricing 3
4. Arm’s length principle
“arm’s length principle” means transactions between associated enterprises
should be computed with regard to Arm’s Length Price
Arm’s length price
“arm’s length price” means a price applied in a transaction between persons
other than associated enterprises, in uncontrolled conditions
Key is comparability!!
Vasai Branch of ICAI- Domestic Transfer Pricing 4
5. February 2002 : Finance Act 2002 introduced Transfer Pricing Provisions in India
with effect from 01April 2002 – covered international transactions.
February 2012: Finance Act 2012 introduced Domestic Transfer Pricing
provisions in India with effect from 01 April 2012 – covered specified
domestic transactions
February 2012: Finance Act 2012 introduced Advance Pricing Agreement
(APA) with effect from 01 July 2012.
August 2013: Central Board of Direct Taxes (the “CBDT”) introduced draft safe
harbour rules on 14 August 2013 . On 18 September 2013, the rules were finalized
considering the recommendations received
The Transfer Pricing Journey
Vasai Branch of ICAI- Domestic Transfer Pricing 5
7. Countries already having Domestic TP
Prominent names:
• Australia*
• Brazil
• China
• France
• Russia
• South Africa*
• UK
*to a limited extent
Common practice in many countries – Not a new phenomenon
Vasai Branch of ICAI- Domestic Transfer Pricing 7
8. Brief background
Supreme Court (SC) in Glaxo Smitkline Asia (P) Ltd. (2010) 195 Taxman 35 (SC),
observed that there was a need to extend TP regulations (as applicable to Int. Tr) to
domestic transactions.
In order to give effect to the above SC observation, The Finance Act (FA) 2012 has
extended the scope of Transfer Pricing (TP) regulations as applicable to ‘international
transactions’ (Int. Tr) to ‘specified domestic transactions’ (SDT) with effect from A.Y.
2013-14.
Objective behind applying and extending of scope of transfer pricing regulations to
domestic transactions:
• In determination of income from domestic related party transactions and
• determination of reasonableness of expenditure between related domestic parties.
• It will create legally enforceable obligation on assessees to maintain proper
documentation.
Vasai Branch of ICAI- Domestic Transfer Pricing 8
9. Intent of Indian DTP Regulations
Particulars (Ordinary Situation) Co. X (SEZ) Co. Y (DTA)
Income 500 1000
Income from related party 100 -
Expenses 300 800
Expense to related party - 100
Profit/ Loss 300 100
Tax rate applicable 0% 32.45%
Tax - 32.45 (100*32.45%)
Particulars (Planned Situation) Co. X (SEZ) Co. Y (DTA)
Income 500 1000
Income from related party 200 -
Expenses 300 800
Expense to related party - 200
Profit/ Loss 400 -
Tax rate applicable 0% 32.45%
Tax - -
Loss to
Revenue –
Tax Saving
to the Group
Vasai Branch of ICAI- Domestic Transfer Pricing 9
10. Intent of DTP Regulations
Loss making
company
Taxable unit
Tax Holiday
Unit
Profit making
company
Shifting of expenses Shifting of expenses
Shifting of income Shifting of income
Vasai Branch of ICAI- Domestic Transfer Pricing 10
11. Overview of the Provisions
Scope of TP provisions expended w.e.f AY 2013-14 by including “SDT” if aggregate
value of such transaction exceeds INR 5 Crores [ INR 20 Crores w.e.f. AY 2016-17]
“Specified Domestic Transactions “ in case of an assessee means any of the following
transactions, not being an international transaction , namely –
i. Any expenditure in respect of which payment is made or to be made to a person
u/s 40A(2)(b) ;
ii. Any transaction referred u/s 80A ;
iii. Any transfer of goods/services u/s 80-IA ;
iv. Any business transaction u/s 80-IA(10) ;
v. Any transaction under Chapter VI-A or u/s 10AA – to which provisions of Sec
80-IA (8) or (10) applies ; or
vi. Any other transaction as may be prescribed.
Vasai Branch of ICAI- Domestic Transfer Pricing 11
12. SDT
Inter unit transfer of goods & services by undertakings
to which profit-linked deductions apply- S.80IA(8)
Expenditure
incurred
between
related parties
defined under
section 40A
Transactions between undertakings, to which profit-
linked deductions apply, having close connection
S.80IA(10)
Any other
transaction
that may be
specified
Overview of Provisions of Section 92BA
Vasai Branch of ICAI- Domestic Transfer Pricing 12
13. Move from FMV to ALP
Fair Market Value Arm’s Length Price
No method prescribed for
computing market value
Six methods prescribed for
computing ALP
No documentation required to be
maintained
Contemporaneous documentation
required
Other than reporting in tax audit
report, no compliance
Accountant’s Report to be filed
Assessment done by AO Assessment done by TPO
Vasai Branch of ICAI- Domestic Transfer Pricing 13
15. Section 40A(2) – Payments to Related Parties
“40A(2)(a) Where the assessee incurs any expenditure in respect of
which payment has been or is to be made to any person referred to in
clause (b) of this sub-section, and the Assessing Officer is of opinion that
such expenditure is excessive or unreasonable having regard to the fair
market value of the goods, services or facilities for which the payment is
made or the legitimate needs of the business or profession of the assessee
or the benefit derived by or accruing to him therefrom, so much of the
expenditure as is so considered by him to be excessive or unreasonable
shall not be allowed as a deduction.
“Provided that no disallowance, on account of any expenditure being
excessive or unreasonable having regard to the fair market value, shall be
made in respect of a specified domestic transaction referred to in section
92BA, if such transaction is at arm's length price as defined in clause (ii)
of section 92F.”
Vasai Branch of ICAI- Domestic Transfer Pricing 15
16. Section 40A(2) – Payments to related parties
General scope of Section 40A(2)
‘Any expenditure’ in respect of which payment has been or is to be made to
Specified Persons
Specified persons having Substantial Interest ( i.e. more than 20% voting power or
share in profits) in taxpayer’s business and vice-versa covered
Generally, following payments may be covered:
- Payment towards purchase of raw materials, services,
- Payment towards sharing of common premises/facilities
- Payment of interest on loan
- Payment of managerial remuneration, salary, bonus etc to directors
Vasai Branch of ICAI- Domestic Transfer Pricing
16
17. Persons covered u/s. 40A(2)(b)
Clauses
(i) any relative of an individual assessee
(ii) any director or his relative of a company assessee*
(iii) any individual having substantial interest in the business of assessee, or his
relative
(iv) a company having a substantial interest in the business of assessee or its director
or any relative of such director or any other company carrying on business or
profession in which the first mentioned company has substantial interest*
(v) a company of which a director has a substantial interest in the business of the
assessee; or any director of such company or any relative of such director*
(vi)(A) any person in whose business individual assessee or his relative have
substantial interest
(vi)(B) any person in whose business a company or any director of such company or
his relative have substantial interest*
*Also include partner or member of such firm, association or family along with director of company
Vasai Branch of ICAI- Domestic Transfer Pricing 17
18. Type of transactions covered…
Case 1 - Director or any relative of the
Director of the taxpayer – Section
40A(2)(b)(ii)
Mr. A Mr. C
Assessee
(Taxpayer)
Mr. D
Director
Relative
Covered transactions
Case 2 - To an individual who has
substantial interest in the business or
profession of the taxpayer or relative of
such individual – Section 40A(2)(b)(iii)
Mr. A Mr. C
Assessee
(Taxpayer)
Mr. D
Relative
Substantialinterest>20%
Relative
Holding Structure
Vasai Branch of ICAI- Domestic Transfer Pricing 18
19. Type of transactions covered …
Case 3 – To a Company having substantial
interest in the business of the taxpayer or
any director of such company or relative of
the director – Section 40A(2)(b)(iv)
A Ltd
Mr. C
Assessee
(Taxpayer)
Mr. D
Relative
Director
Covered transactions
Case 4 – Any other company carrying on
business in which the first mentioned
company has substantial interest – Section
40A(2)(b)(iv)
C Ltd
B Ltd
Assessee
(Taxpayer)
A Ltd
Substantialinterest>20%
Holding Structure
Substantial
interest >20%
Substantial interest >20%
Substantialinterest>20%
Vasai Branch of ICAI- Domestic Transfer Pricing 19
20. Type of transactions covered …
Case 5 – To a Company of which a director has a substantial interest in the business of the taxpayer
or any director of such company or relative of the director – Section 40A(2)(b)(v)
Mr. A
Mr. C
Assessee
(Taxpayer)
B Ltd
Director
Covered transactions
Holding Structure
Substantial
interest >20%
Mr. D
Relative
Vasai Branch of ICAI- Domestic Transfer Pricing
20
21. Type of transactions covered..
Case 6 – To a Company in which the
taxpayer has substantial interest in the
business of the company – Section
40A(2)(b)(vi)(B)
B Ltd
Assessee
(Taxpayer)
Covered transactions
Case 7 – Any director or relative of the
director of taxpayer having substantial
interest in that person– Section
40A(2)(b)(vi)(B)
Mr C
Mr B
Assessee
(Taxpayer)
A Ltd
Substantial interest >20%
Holding Structure
Substantial
interest>20%
Relative
D Ltd
Substantial interest >20%
Vasai Branch of ICAI- Domestic Transfer Pricing
21
22. Type of transactions covered
B
A
C
D E
Transaction Covered
A & B
A & C
A & D
A & E
B & C
D & E
C & D
D & E
Vasai Branch of ICAI- Domestic Transfer Pricing
22
23. Section 40A(2) – Example
A Ltd. B Ltd.
Substantial Interest
Payment of rent
Payment of Rent Rs. 1,000
ALP of Rent Rs. 800
Disallowance for A Ltd. Rs. 200
Corresponding Adjustment?
Vasai Branch of ICAI- Domestic Transfer Pricing
23
24. Issues and Challenges – 40A(2)(b)
• Direct vs Indirect ownership ?
• Shareholding to be considered for the purpose of beneficial ownership – Standalone
or Aggregate?
• Capital vs Revenue expenditure?
• Does this exclude transactions undertaken with non-residents?
• Director remuneration
• Corresponding adjustments
• Availability of APA
• Availability of DRP route for adjustments made in respect of domestic TP
transactions
Vasai Branch of ICAI- Domestic Transfer Pricing
24
26. Inter unit transactions between 2 eligible units is covered
S. 80IA(8) states as follows :-
“Where any goods or services held for the purposes of the eligible business are
transferred to any other business carried on by the assessee, or where any goods or
services held for the purposes of any other business carried on by the assessee are
transferred to the eligible business and, in either case, the consideration, if any, for such
transfer as recorded in the accounts of the eligible business does not correspond to the
market value of such goods or services as on the date of the transfer, …”
Accordingly, Sec. 80IA(8) requires that transfer of goods and services between the eligible
business and any other business (which includes eligible or non-eligible business) of the
taxpayer shall be at market value / Arm’s Length Price.
Reference to Memorandum to the Finance Bill 2012 (Page 24):
“Therefore, the transfer pricing regulations need to be extended to the transactions entered
into by domestic related parties or by an undertaking with other undertakings of the same
entity for the purposes of section 40A, Chapter VI-A and section 10AA.
Vasai Branch of ICAI- Domestic Transfer Pricing
26
27. Unit A
80IA- Eligible Unit Unit B
Taxable Unit
A Ltd
Section 80IA (8)- Example
Goods & Services
Transfer at Rs. 120
Market value of above goods and services is Rs. 100
So, ALP of above transaction is Rs. 100
Vasai Branch of ICAI- Domestic Transfer Pricing
27
28. Transactions Covered u/s 80-IA(10)
• Where it appears to the Assessing Officer that, owing to the “close connection”
between the assessee carrying on the “eligible business” and any other person, the
“course of business” between them is so arranged that the business transacted between
them produces to the assessee ‘more than the ordinary profits’, the Assessing Officer
shall, take the amount of profits as may be reasonably deemed to have been derived
therefrom.
• New insert - Provided that in case the aforesaid arrangement involves a specified
domestic transaction, the amount of profits from such transaction shall be determined
having regard to arm's length price.
• Section 80-IA(10) refers to the “course of business”, which may have a wider meaning
than business or a transactions, and may intend including the circumstances
surrounding the transactions. The ALP analyses the transaction more ‘holistically’ and
best represents such situations.
Vasai Branch of ICAI- Domestic Transfer Pricing 28
29. Section 80IA (10)- Example
A Ltd
Infrastructure
Business
B Ltd
Trading Business
Goods and Services
Close connection
Operating Profit: 40% (Extraordinary profits)
Industry Average: 10%
Hence, Arm’s length profit margin would be taken as 10%
80IA- Eligible Unit Taxable Unit
Vasai Branch of ICAI- Domestic Transfer Pricing
29
30. Illustration – Tax holiday undertakings
A Z
X & Y Yes
Y & Z No
X & Z Yes, if Z is
closely
connected
to A
X Y
• Requirement to justify that goods and services transactions are at arm’s length price
• Requirement that profits of undertaking are ‘ordinary profits’ having regard to ALP
Tax holiday
undertaking
DTA
undertaking
Transactions covered ?
Vasai Branch of ICAI- Domestic Transfer Pricing
30
31. Possible Tax Inefficiency
X Ltd.
(non-tax holiday)
Y Ltd.
(non-tax holiday)
Sale at 120 v/s
ALP
(ie 100)
Disallowance of
INR 20
[40A(2)(b)]
X Ltd.
(non-tax holiday)
Y Ltd.
(tax holiday)
Sale at 120 v/s
ALP (100)
Double Disallowance
INR 40
[40A(2)(b) and excessive
profit]
X Ltd.
(non-tax holiday)
Y Ltd.
(tax holiday)
Sale at 80 v/s
ALP (100)
Inefficient pricing
structure – Reduced tax
holiday benefit
Vasai Branch of ICAI- Domestic Transfer Pricing 31
32. Section 80IA (8) and Section 80IA (10)
Sec 80 IA (8) Sec 80- IA (10)
• Inter unit transaction of
goods or services
• Business transacted with any other person
generates more than ordinary profits
• Owing to either close connection or any other
reason
• Transfer at market value • Ordinary profit
• Onus of tax payer • Primary onus on taxpayer
• Onus on tax authorities
Vasai Branch of ICAI- Domestic Transfer Pricing 32
33. Issues and Challenges – Sec 80-IA
• Overlap with Sec 80A(6); of no material consequence
• No guidance on meaning of Close connection?
• Head office allocations to the units
• Loss making tax holiday units
• Aligning Ordinary profits with ALP
Vasai Branch of ICAI- Domestic Transfer Pricing 33
34. Intricacies of Value Threshold
• Threshold limit of INR 20 Crores to be taken on an aggregated basis for limbs of SDT
• Book value of transaction to be covered for Threshold limit even if transactions are ALP
compliant
Transaction Value as per
books
ALP Value as per
books
ALP
40A(2)(b)
payment
15 15 13 13
Inter-unit
transfer
4.5 6.5 8 6
Total 19.5 21.5 21 19
Reporting
requirement
Not required Required
INR in Crs
Interest free loan-80IA-10 ?
Vasai Branch of ICAI- Domestic Transfer Pricing
34
36. ALP Computation - Overview of Methods
Prescribed Methods
Other Method
- Price
Charged or
paid / would
have charged
or paid
Transaction based Methods Profit based Methods
CUP
Method
RPM
Method
CPM
Method
TNMM
Method
PSM
Method
No hierarchy or preference of methods prescribed under the Act
The methods applicable for determining ALP for SDT transactions are same as those for
international transactions
Vasai Branch of ICAI- Domestic Transfer Pricing 36
37. CUP Method
Independent
Co.
Sub. Co. A
Subsidiary
Internal CUP
Internal CUP is preferable
A Ltd
External CUP
A Ltd
Sub. Co. A
ltd
Sale of goods
Independent
Co.
Sale of goods
Similarity of
Functions, Asset
and Risks ?
Independent
Co.
Sale of goods
Sale of goods
Vasai Branch of ICAI- Domestic Transfer Pricing 37
38. RPM
Distributor I
Co. (AE)
USA India
Independent 3rd
Party
Product A @ Rs. 75
Product A
@ Rs. 100
Manufacturer
F Co.
25% resale (gross) margin earned - to be benchmarked
Vasai Branch of ICAI- Domestic Transfer Pricing
38
40. Profit Split
Particulars Rs. Rs.
Combined Group Profits 100
Assign basic return to each entity
• Entity A 30
• Entity B 20
• Entity C 10 60
Residual profit 40
Contribution analysis (based on relative contribution of
the entities)
• Entity A 30
• Entity B 10
Contribution Analysis –
Element of subjectivity
Vasai Branch of ICAI- Domestic Transfer Pricing 40
41. Other Method
Rule 10AB
“…….the other method for determination of the arms' length price in relation to an
international transaction shall be any method which takes into account the price which
has been charged or paid, or would have been charged or paid, for the same or similar
uncontrolled transaction, with or between non associated enterprises, under similar
circumstances, considering all the relevant facts.”
Effective AY 2012-13
Vasai Branch of ICAI- Domestic Transfer Pricing 41
42. Most Appropriate Method – Snapshot
Method Transaction Type
CUP Loans, royalties, commission, transfer of tangibles, guarantee
fees
RPM Distribution (without value addition)
CPM Sale of finished / semi-finished goods or services
PSM Highly integrated transactions, transactions involving unique
intangibles
TNMM Provision of services, manufacture / distribution of finished
goods
Other Method Revenue split, valuation of unique intangibles, business
transfers, valuation of unlisted shares, cost allocation,
reimbursements, etc.
Vasai Branch of ICAI- Domestic Transfer Pricing 42
44. Accountant’s Report in Form 3CEB
On June 10, 2013, CBDT notified new Form 3CEB containing disclosure of SDT –
Part A to Form 3CEB
• Clause 9 – Aggregate Value of specified domestic transactions as per books of accounts
Part C to Form 3CEB
• Clause 21 – disclosure of PAN of the AE in addition to other disclosures
• Clause 22 - disclosure of expenditure for payment made / to be made to person referred to in Sec
40A(2)(b)
• Clause 23A – disclosure of inter-unit transactions (in the nature of sale by the eligible business/
unit of the taxpayer) as referred to in S. 80A(6), 80-IA(8) or 10AA
• Clause 23B – disclosure of inter-unit transactions (in the nature of purchase by the eligible
business/ unit of the taxpayer) as referred to in S. 80A(6), 80-IA(8) or 10AA
• Clause 24 – disclosure of business transacted with closely connected person (which has resulted in
more than ordinary profits to an eligible business/ unit of the taxpayer) as referred to in S. 80-
IA(10) or 10AA
• Clause 25 – disclosure of any other transaction not covered in the above clauses [residual clause]
Vasai Branch of ICAI- Domestic Transfer Pricing
44
45. Penalties
The Indian TP legislation prescribes stringent penalties for not maintaining/ furnishing
annual documentation and Accountant’s Report:
No deduction available for TP adjustments after scrutiny by the AO under
Sec. 10A, 10AA, 10B or Chapter VI-A
Default Nature of penalty
In case of a post-inquiry adjustment,
there is deemed to be a concealment
of income
100-300% of tax on the adjusted amount
Failure to maintain documents 2% of the value of each international transaction or specified
domestic transaction
Failure to furnish documents 2% of the value of each international transaction or specified
domestic transaction
Failure to report a transaction in
accountants report (inserted by
Finance bill 2012)
2% of the value of each international transaction or specified
domestic transaction
Maintaining or furnishing incorrect
information or documents
2% of the value of each international transaction or specified
domestic transaction
Vasai Branch of ICAI- Domestic Transfer Pricing
45
46. Domestic Transfer Pricing- Litigation
Vasai Branch of ICAI- Domestic Transfer Pricing
Filed tax return and
Accountant’s Report
(30 Nov. 2013)
TP order
(31 January 2017)
Draft AO order (31
March 2017)
AO passes final order
(31 January 2018)
DRP order (31
December 2017)
ITAT
final fact finding
authority
High Court – on
questions of law
Supreme Court
46
48. Payment of Logo Charges
Holding Company
(ownership of
brand/trademark)
A Ltd
(Healthcare)
Payment of logo charges: 1.25% of sales by each entity to the holding co.
Benchmarking issues: how to evaluate ALP of logo charges
B Ltd
(Insurance)
C Ltd
(Home
Appliances)
Vasai Branch of ICAI- Domestic Transfer Pricing
48
49. Interest Free Loan
A Ltd. B Ltd.
SDT Implications
A Ltd. – Income is not covered ; no implication u/s 40A (2)
B Ltd. – No payment of interest; no implication u/s 40A (2)
B Ltd. – Possibility of disallowance on account of extra-ordinary profit u/s 80IA -10
Eligible Unit
Interest Free Loan
Vasai Branch of ICAI- Domestic Transfer Pricing
49
51. Four Step Action Plan
Identifying SDTs
Identify inter company Transactions/ arrangements
that would be covered within the ambit of Domestic
TP provisions
Map the transactions and document the current
policy of pricing/allocation
Understand implications
Review the agreements/documents in support of the
current inter company pricing/allocations
Analyze whether the current pricing policy of the
group are in line with the arm’s length principle
Technical assessment of the arrangements to evaluate
applicability of SDT provisions and possible approach
for establishing ALP for the arrangements where SDT
applies
Compliance requirements
Maintain prescribed TP documentation as stipulated
under Rule 10D of the ITL within the prescribed
due date (Nov 30, 2015 for FY 2014-15
transactions)
Obtain and file Form 3CEB with the tax authorities
(Nov 30, 2015 for FY 2014-15 transactions)
Impact assessment
Undertake Functional analysis of the identified
transactions
Undertake a bench marking analysis
1 2
4 3
Vasai Branch of ICAI- Domestic Transfer Pricing
51
52. Relevant sections in Chapter X
Applicability similar to international transactions
Section Provisions Applicability of SDT
92 Computation of Income having regard to the Arm’s
Length Price (‘ALP’)
Yes
92A Meaning of Associated Enterprise No
92B Meaning of International Transaction No
92C Method for computing ALP Yes
92CA Reference to the TPO Yes
92CB Safe Harbour Rules Yes
92CC Advance Pricing Agreement No
92CD Effect of Advance Pricing Agreement No
92D Maintenance of information & documents Yes
92E Accountant’s Report Yes
144C Dispute Resolution Panel Yes
Vasai Branch of ICAI- Domestic Transfer Pricing
52
54. Indirect shareholding under Sec. 40A(2)(b)(iv)
“Section 40A(2)(b)(iv) - “a company, firm, association of persons or Hindu undivided family having a substantial
interest in the business or profession of the assessee or any director, partner or member of such company, firm,
association or family, or any relative of such director, partner or member or any other company carrying on
business or profession in which the first mentioned company has substantial interest”
Explanation.—For the purposes of this sub-section, a person shall be deemed to have a substantial interest in a
business or profession, if,—
(a) in a case where the business or profession is carried on by a company, such person is, at any time during the
previous year, the beneficial owner of shares (not being shares entitled to a fixed rate of dividend whether with or
without a right to participate in profits) carrying not less than twenty per cent of the voting power;”
Company A
Company B Company C
Company D Company E
100%
100%100%
100%
Whether under SDT?
Whether
underSDT?
55. Substantial interest – consider individual shareholding
SDT not applicable in any of these
examples
However, once any one director of a
company holds shares more than 20% in
other company, all other directors of that
company will be considered as related
parties irrespective of their
shareholdings
Mr. X
Company A
(Assessee)
Relative of
Mr. X
Director X
Company
B
Assessee
Director Y
WhetherunderSDT?
Company
A
Relative Z
of Y8%
56. Director’s Remuneration
• Payment to directors including inter alia remuneration, sitting fees,
commission, perquisites etc., are covered under SDT provisions
• To clarify, a director includes any director of a company, regardless of the
nature of directorship
• The Delhi HC in the case of Shriram Pistons Ltd held that director payment
approved by company law board shall be reasonable under 40A(2)(b)
• Remuneration paid accordance with the Companies Act,2014 should not
attract disallowance
• For private limited company an external benchmarking may be required
considering similar qualification level, experience, skill set and operational
capacities
57. Close connection?
Particulars AS-18 40A(2)(b) 92A(2)
Voting Power >50% >=20% >=26%
Direct or indirect
holding
Both Direct Both
Directors Key Managerial
Personnel
Directors Not covered
Key Suppliers Specifically excluded Not covered More than 90% supplies
58. More than Ordinary Profits
Comparable Company OP/TC
Company A 35%
Company B 10%
Company C 25%
Company D 14%
Company E -8%
Arithmetic Mean 15%
Particulars PLI
Total Income 150
Cost 105
Profit 45
OP/TC 30%
• OP/TC of 30% considered to be at arm’s length by the TPO
• Under 80-IA(10), the AO states that the profits are more than ordinary.
• Possible solutions
- Defend price of transaction,
- Evaluate alternative methods (other than TNMM)